SWOT Analysis for Wal-Mart

Wal-Mart SWOT SWOT Analysis for Wal-Mart i Wal-Mart SWOT ii Wal-Mart’s SWOT analysis will include factors discussed in the accompanying Case Study analysis. It will also include factors that may not have been directly mentioned in the case study. A company’s SWOT analysis focuses on its internal analysis namely the Strengths and Weaknesses and its external analysis namely the Opportunities and Threats. Strengths A company’s strengths are its resources and capabilities used to develop a competitive edge and also implement its strategies. They are factors that need to be built, maintained and leveraged. Strong financials, cash reserves, unique technology, reputation, brand popularity and sourcing are some examples of a company’s strength. Wal-Mart’s strength is its reputation of a “big Box” store and the everyday low prices for commonly used products. This opens up a major share of the consumers who want value at low prices. Their ability to source merchandise at low prices worldwide paired with their massive buying power and distribution network lets them dominate the retail sector in the markets they operate in. Wal-Mart’s financials have been strong. The revenue from their domestic growth has helped them with their direct investments in other countries. Wal-Mart has a core competence involving its use of technology to support its international logistic system. For example, it can see how individual products are performing country wide or store by store at a glance and that in turn supports its efficient procurement. Weaknesses A company’s weaknesses are a lack of resources and capabilities that stops it from implementing its strategic goals and objectives. They are factors that need to either be remedied or eliminated. Flawed tactical and operational plans, company policies, Scandals/ Ethics issues, aging infrastructure, flawed distribution are some examples of a company’s weaknesses. WalMart’s anti-union stance has always been an issue that the critics have targeted. International markets have also shown their displeasure in such labor practices. This weakness opens up WalMart to scrutiny in human resources area. Low wages and no benefits cause low morale and it also burdens the taxpayer to pick up for the health benefits of a Wal-Mart worker. Lack of business-level strategy and corporate-level strategy is also hurting Wal-Mart. In Germany, their business-level strategy was not successful because they were not able to understand the local consumer’s tastes and habits. Kaufland and Aldi capitalized on this weakness of Wal-Mart. Their corporate-level strategy has also not been too effective. This is evident in the fact that Wal-Mart has not branched out several other retail sectors. Wal-Mart brand is also associated with low quality. Consumer perception is low prices means low quality. Although branding can be strength, its association with low prices or low quality could be significant weakness. Wal-Mart is one of the top global retailers and yet its presence is in relatively few countries. The major setbacks it faced in Germany have stalled its growth in Europe. Wal-Mart SWOT iii Opportunities A company’s opportunities are its external conditions that are helpful in achieving its goals or objectives. They are factors that need to prioritized and optimized. Unfilled consumer needs, demographic shifts, possible mergers, trade barriers removed. Wal-Mart has begun to branch out into different sectors such as groceries and pharmacies. Opportunities exist to branch out into other sectors such as retail gas stations, automotive sales and repair and financial services. Wal-Mart has plenty of room to grow globally. As a number one retailer it can grow and compete with Carrefour and Kaufland and Aldi in the Europe. Wal-Mart entered China and India and both these markets have tremendous potential for growth. NAFTA turned the US, Mexico and Canada into a single trading zone. That gives a super retailer like Wal-Mart opportunity to grow into countries that has great demand for US made goods. Threats A company’s threats are external conditions that could damage its performance. They are external factors that the company will counter in the market. Tough economic climate and higher transportation costs may affect Wal-Mart’s growth. Overall retail sales are down by 0.2%, fuel prices are up and unemployment rate is up. These factors affect directly to a retailer that has a large distribution network. In a struggling economy the spending power of an average consumer is slashed significantly and this affects the company’s sales. Competitors such as Aldi and Carrefour have posed a big threat to Wal-Mart’s growth in the European market. They have merged with other major retailers for a better position in the market. As Griffin indicated, “the international retailing industry will undoubtedly consolidate until just a few very large, cross-border retailers remain” (2006, p. 67). Wal-Mart faces stiff competition from Carrefour in Europe and China. It will have a tough time finding the right company for any future merger or takeover. Their merger with the third or the fourth retailer is the best chance possible. For example, in the UK their merger with Sainsbury will give them the edge to take the number one spot from Tesco. In conclusion, for Wal-Mart to grow as a global leader and to expand globally it must carefully examine its SWOT. As Fred Maidment points out, “the world has become a global marketplace that is more competitive and far less forgiving than the national economies of just a few decades ago” (2007, p. 28). Fierce competition, cultural diversity, slowing economy and changing technologies are some of the factors that will prove to be a challenge for the company’s growth and profitability. Their position as a number one retailer in the US with a presence in 14 other international markets, their reputation for low prices, their unique technology and their “big box” store image gives them a fair chance to achieve their strategic goals of growth by acquisition.